This article contains questions and answers about Child Support deduction regulations and practices.
The information in this article is referenced directly from the U.S. Department of Health and Human Services site http://www.acf.hhs.gov/programs/css/resource/processing-an-income-withholding-order-or-notice
This content is for informational or instructional purposes only. This content is referenced from an external website and may be changed or superseded without notice. It is not part of any Avionté product or services warranty.
Visit the Employee Payroll - Deduction help article for specific deduction instructions in Avionté.
Is there a priority in which deductions must be withheld?
A child support IWO (Income Withholding) must be paid before all other garnishments, with one exception: a federal (IRS) tax levy entered prior to the underlying child support order. The date that the child support order is established determines precedence, not the date the IWO is served on the employer.
Not only must child support be paid first, but a higher percentage of the employee's disposable income may be withheld for child support than for other garnishments. The employer deducts the specified amount of child support each pay period and sends it to the state disbursement unit (SDU), which then forwards the payment to the custodial party.
How is income defined?
Income is defined as any periodic form of payment due to an individual, regardless of source, including wages and salaries, commissions, bonuses, workers' compensation, disability, payments pursuant to a pension or retirement program and interest.
How is child support processed?
Upon receipt of the Income Withholding for Support (IWO), the employer should:
- Document the date of receipt.
- Determine if the order is "regular on its face." See "Note" in the first box on Page One of the IWO form. If the IWO does not direct payments to the SDU, it is not regular on its face and must be returned to the sender. Page One of the instructions gives additional information on when to return an order that is not regular on its face. If the IWO is not regular on its face for any of the reasons listed, the employer must check the box "Return to Sender" on Page Two and return the IWO to the sender.
- A copy of the underlying child support order allowing income withholding must be attached if the IWO is not sent by a court or child support agency. If the child support order should be attached but is not, return the IWO to the sender.
- Give a copy of the IWO to the employee if the IWO has been issued by another state.
- Follow the terms of the order.
Only the employee has the right to dispute the terms of a child support IWO and should do so by contacting the issuing agency or tribunal. The employer cannot contest the income withholding order; however, the employer must contact the issuing agency if unable to implement the withholding because a withholding for current support is already in place for the child and employee. See "Special Situations" below. If the employee has been terminated, the employer must report that termination by returning Page Three of the IWO to the sender.
Follow the law of the issuing state regarding:
- Duration and amount of child support, both current and arrears
- Medical support terms
- Where to remit payments
- Payment of fees and costs charged (if any) by the child support enforcement agency, issuing court or custodial party's attorney
Follow the law of the employee's principal place of employment regarding:
State law provides for fines against an employer who discharges from employment, refuses to hire or takes disciplinary action against an employee in response to withholding.
- When to begin withholding
- When to remit payments (this may be from 1 to 7 days after payday)
- Mandatory deductions
- Maximum amount to be withheld (within Consumer Credit Protection Act limits)
- How to allocate withholding across multiple child support orders
- Administrative fee that employer is permitted to charge
- Other terms and conditions that may be set by state law
How are withholding calculations determined?
There are two steps to determine how much to withhold for child support from an employee's income: calculating disposable income and calculating allowable disposable income.
- Disposable Income = gross pay - mandatory deductions.
- Disposable income is the amount of earnings remaining after subtracting certain mandatory deductions from an employee's gross pay.
- Mandatory deductions include: federal, state and local taxes; unemployment insurance; workers' compensation insurance; state employee retirement deductions; other deductions determined by state law.
- Note that disposable income is not necessarily the same as net pay. An employee may have a deduction taken from his pay that is not mandatory, such as union dues or a car loan payment.
- Allowable disposable income is the maximum available for child support withholding. In most cases, the amount ordered to be withheld will be less than the allowable disposable income amount, and the ordered amount can be withheld without any problem. Even if the withholding order specifies a higher payment, the allowable disposable income is the most that may be withheld.
- The Federal Consumer Credit Protection Act (CCPA) sets limits on withholding an employee-parent's disposable income based on his/her current family situation and child support payment history. The CCPA protects the employee from having an excessive amount withheld. (Some states have enacted laws that provide even more protection to the employee-parent's income, although most states follow the federal limits.
- The withholding limits set by the federal CCPA are as follows:
- 50% - Supports a second family, with no arrearage or less than 12 weeks in arrears
- 55% - Supports a second family, and more than 12 weeks in arrears
- 60% - Single, with no arrearage or less than 12 weeks in arrears
- 65% - Single, and is more than 12 weeks in arrears
(A second family means there is a spouse and/or child for whom the employee has responsibility. "In arrears" means there is past due, unpaid support owed by the noncustodial parent.)
Child Support Withholding Examples
Allowable Disposable Income
There are two steps to calculate child support withholding:
- Gross income - mandatory deductions = disposable income
- Disposable income x CCPA % limit = allowable disposable income
If allowable disposable income ≥ ordered amount, then withhold ordered amount.
If allowable disposable income < ordered amount, see Special Situations-Not Enough Money below.
- Weekly gross pay is $760
- Weekly child support due is $295
- Mandatory deductions total $151
- Employee-parent is single and does not owe back child support
The law of the state where the employee works (the "principal place of employment" state) determines which deductions are mandatory. In some states, the example below would change because things such as health insurance and union dues are mandatory deductions.
Note the following differences between net pay and disposable income in this example. The amount of disposable income, $609, is used to determine child support withholding limits, rather than the net pay, $469.
Federal income tax
Health insurance (pre-tax)
If you take the same example but increase the weekly child support payment to $400, you cannot withhold the full amount due. You may only withhold a maximum of $365.40. This means that the employee will fall behind by $34.60 and will be "in arrears." Some states charge interest on the overdue amounts. The employee has the option of paying the underpaid amount directly to the issuing agency if he or she does not want to fall into arrears.
Pre-tax deductions (e.g., 401(k) plan contributions) are adjustments to earned income before taxes are deducted, thus reducing an employee's taxable earnings. Although the employee voluntarily elected to trade current disposable income for a deferred benefit, there is no reason to deny a portion of this income to his or her child.
In calculating disposable income for child support, pre-tax deductions must be added to the employee's taxable wages before determining the obligated employee's allowable disposable income.
Value of Fringe/Non-cash Benefits
The value of fringe benefits such as a take-home vehicle, free parking space, or other non-cash benefit is subject to taxation but is not considered "income" for the purpose of calculation of disposable income for child support purposes.
In calculating disposable income for child support, the value of fringe benefits must be subtracted from the employee's gross pay before determining the obligated employee's allowable disposable income.
Multiple Income Withholding Orders - Same Employee and Same Child
There should not be more than one withholding order for current support for a child. There may be more than one withholding order for a child if only one order has a current support amount due. The issuing agencies, not the employer, are responsible for resolving any duplication. The employer receiving a duplicate withholding order should follow these steps:
Multiple Income Withholding Orders - Same Employee and Different Children
Federal regulations require that some money must be paid to each order for current support if there is more than one withholding order for the same employee. In addition, states have enacted laws specifying the method for allocating money toward current support due for each order. Thus, some money must be allocated toward all current support orders. The orders should not be paid on a "first come, first served" basis.
Not Enough Money to Withhold Full Ordered Amount
If there is enough allowable disposable income to pay multiple orders, the employer should pay the full amount of current support due for each order. Sometimes, however, an employee's earnings do not stretch far enough to pay all his or her obligations. If there is not enough allowable disposable income, the allocation method of the employee's principal state of employment must be followed to determine how much to pay on each order.
States use one of two methods to allocate withheld payments among multiple withholding orders:
Method 1: Pro-rate by allocating a percentage to each order based on the total dollar amount of current support orders.
Method 2: Share equally by dividing the allowable disposable income by the total number of orders.
The prorate method is used by 49 states/territories; the equal method is used by six states/territories. See the State Income Withholding Information matrix for more information.
IRS Tax Levy and Child Support
An IRS tax levy takes precedence over a child support withholding order only if the tax levy was entered before the child support order was established. The priority determination between a child support withholding order and an IRS tax levy depends on the date that the original child support order was established. Remember that the child support order is the order on which the income withholding order is based.
The employer usually is not informed of the original order date. Therefore, the following action is recommended:
A federal tax levy is the only deduction that takes precedence over child support. Remember that child support should always be withheld before the following voluntary and involuntary deductions:
Other Garnishments and Child Support
Guidelines: A child support IWO must be paid before all other garnishments. When you have a child support IWO and a garnishment for your employee:
Example A: Tony's child support withholding obligation is $180.00/week. His weekly disposable income is $700. Sears serves a garnishment against Tony for a $1,000 debt.
Example B: Tony's child support withholding obligation is $140/week. His weekly disposable income is $1,000. Sears serves a garnishment against Tony for a $1,000 debt.